23 October 2017
Finland takes a leap towards a new Trade Secrets Act in the implementation of the EU Trade Secrets Directive

On 18 October 2017, the Finnish Ministry of Economic Affairs and Employment's working group on trade secrets published a memorandum proposing the reform of trade secrets legislation in Finland. The working group proposes the enactment of a new act on trade secrets , the "Trade Secrets Act" (FI: liikesalaisuuslaki),  to enhance the protection and enforcement of trade secrets in Finland and to implement the changes required by the adoption of the EU-wide trade secrets reform. The proposed Trade Secrets Act specifically concerns also trade secrets in relation to provisioning of services.  When enacted, the new Trade Secrets Act is expected to provide a more coherent and uniform framework for trade secret protection in Finland.

Trade Secrets Directive – Setting a new baseline for trade secret protection across the EU

The contemplated Finnish reform stems from the adoption of the Trade Secrets Directive (Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure).

The Trade Secrets Directive seeks to standardize the national laws in the European Union ("EU") countries against the unlawful acquisition, disclosure, and use of trade secrets. The Directive, inter alia, harmonizes the definition of trade secrets, defines the relevant forms of misappropriation, as well as clarifies that reverse engineering and parallel innovation must be guaranteed. Furthermore, while not establishing criminal sanctions, the Trade Secrets Directive provides a harmonized approach for the civil remedies available for the victims of trade secret misappropriation. Such remedies include, for example, stopping the unlawful use and further disclosure of misappropriated trade secrets, the removal from the market of goods that have been manufactured on the basis of a trade secret that has been illegally acquired, and the right to compensation for the damages caused by the unlawful use or disclosure of the misappropriated trade secret.

EU countries must implement the Trade Secrets Directive by 9 June 2018.

New Finnish Trade Secrets Act: From a fragmented framework to consolidated trade secret protection and civil enforcement

As a consequence of the Trade Secrets Directive, the Finnish Ministry of Economic Affairs and Employment assigned in late 2016 a working group to prepare the national implementation of the Directive in Finland. On 18 October 2017 the working group published its recommendation in which it proposes a reform and consolidation of the Finnish legislation concerning civil means addressing the protection and enforcement of trade secrets. The aim is to enhance the protection of trade secrets by providing broader and more specific legal remedies against trade secret misappropriation.

In Finland, the provisions relating to the protection and enforcement of trade secrets are currently scattered around the Finnish legislation: the Unfair Business Practices Act (FI: laki sopimattomasta menettelystä elinkeinotoiminnassa), Criminal Code (FI: rikoslaki), Employment Agreement Act (FI: työsopimuslaki), and Act on the Openness of Government Activities (FI: laki viranomaisten toiminnan julkisuudesta) as well as certain other laws contain provisions governing the protection of trade secrets. The broad spectrum of trade secret related legislation, including the lack of a unified definition of a "trade secret", has led to the fragmentation of trade secret protection in Finland.

To address the challenges of the existing system and to meet the requirements of the Trade Secrets Directive, the working group proposes the adoption of new special legislation concerning trade secrets, the Trade Secrets Act. According to the proposal, the new Trade Secrets Act would focus on the civil aspects of trade secret protection and govern both the protection of trade secrets as well as the remedies for misappropriation of trade secrets. Provisions from the Unfair Business Practices Act concerning trade secrets as well as technical models and instructions would be transferred to the new Act and adapted to the new legal environment. The new Act would not address criminal sanctions concerning misappropriation of trade secrets governed by the Criminal Code.

Unified protection for trade secrets, broader scope of remedies for misappropriation, and a safety valve for whistleblowing

According to the proposal, the new Trade Secrets Act would contain a generally applicable definition of a "trade secret". According to the proposal, and in line with the Trade Secrets Directive, information would constitute a "trade secret" if:

  1. such information is secret because it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
  2. the information has commercial value because it is secret; and
  3. the person lawfully in control of the information has taken reasonable steps to keep the information secret.

Furthermore, the proposed Act would contain provisions concerning the unlawful acquisition, use, and disclosure of trade secrets as well as provisions relating to the lawful means of acquiring trade secrets. In addition, employee's confidentiality obligations concerning the employer's trade secrets are proposed to be further specified in the Employment Agreements Act.

In accordance with the proposal, the contemplated Act would also include whistleblowing provisions enabling a person to notify misconduct and illegal activities and to use freedom of speech irrespective of trade secret protection. The new Act is proposed to include also provisions enabling employees to disclose trade secrets to employee representatives in certain circumstances.

According to the proposal, the remedies available for misappropriation of trade secrets would include, e.g., injunction, preliminary injunction, corrective measures (such as withdrawal and destruction), publication of the judgment, as well as damages. In addition, in certain circumstances instead of ordering an injunction or corrective measures, the Court could also order the defendant using the trade secrets to pay reasonable compensation for such use.

The contemplated Act would also propose changes to confidentiality in Court proceedings: In line with the Trade Secrets Directive, the working group proposes that the Court may not only restrict access of the public to confidential information relating to the proceedings but also restrict access to a limited number of people within a party involved in the proceedings. Nevertheless, a confidentiality request related to the proceedings should not be accepted if it endangers a party's right to fair trial.

Dual track enforcement through District Courts and the Market Court

According to the proposal, both civil and criminal actions concerning misappropriation of trade secrets could be brought before a District Court having general jurisdiction on the matter. The working group further proposes that in a trade secret matter the District Court would have the option of inviting a maximum of two experts to support the Court's expertise by rendering their opinion to questions posed by the Court. If the matter involves a legal person or a natural person engaged in business activities, claims concerning trade secrets could also be brought before the Market Court that acts as the specialized Court in intellectual property matters in Finland.

In accordance with the proposal, civil actions concerning injunctions and corrective measures should be brought before the Court within five (5) years from the date of when the proprietor of the trade secret became aware of the details of the misappropriation giving rise to the claim. Furthermore, it is proposed that such an action could not be brought later than within ten (10) years from the date of the actual misappropriation.

Work continues – New legislation expected to take effect by June 2018

The proposal of the working group now published is open for comments until late November 2017. Following the consultation, it is expected that the proposal will proceed as a governmental bill for consideration before the Finnish Parliament in early 2018. Should the proposal be approved, the new legislation with the new framework for protection of trade secrets is expected to come into force no later than by 9 June 2018 as required by the Trade Secrets Directive.

Read more: The working group's proposal on the Finnish trade secrets reform (available in Finnish only).

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